Debt Ratios for Residential Financing

Your ratio of debt to income is a formula lenders use to determine how much of your income can be used for your monthly mortgage payment after all your other recurring debt obligations have been fulfilled.

About your qualifying ratio

Usually, underwriting for conventional mortgage loans needs a qualifying ratio of 28/36. FHA loans are less strict, requiring a 29/41 ratio.

The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be spent on housing (this includes principal and interest, private mortgage insurance, homeowner's insurance, taxes, and homeowners' association dues).

The second number in the ratio is what percent of your gross income every month which can be applied to housing expenses and recurring debt together. Recurring debt includes things like auto/boat payments, child support and credit card payments.

For example:

A 28/36 qualifying ratio

  • Gross monthly income of $6,500 x .28 = $1,820 can be applied to housing
  • Gross monthly income of $6,500 x .36 = $2,340 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $6,500 x .29 = $1,885 can be applied to housing
  • Gross monthly income of $6,500 x .41 = $2,665 can be applied to recurring debt plus housing expenses

If you'd like to run your own numbers, feel free to use our Mortgage Loan Pre-Qualification Calculator.

Guidelines Only

Remember these are only guidelines. We'd be happy to go over pre-qualification to determine how large a mortgage loan you can afford.

Americn Hero Mortgage can walk you through the pitfalls of getting a mortgage. Call us at 754-202-4376.

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